Deed Riders, Covenants Now Shape the Debate in Affordable Housing

Three feet of snow blanketed the ground that day in 1977 when more than two dozen Islanders trudged into the First Congregational Church in West Tisbury, hoping to win a small piece of the Vineyard.

Ann Milstein was pregnant. Pat Carlet had three small daughters in tow. One by one, Vineyard Open Land Foundation (VOLF) officials pulled names out of a box, awarding five Island families the right to buy land in Pilot Hill Farm at a bargain rate.

Even in the mid-1970s, working Islanders struggled with rising land costs and a shortage of year-round rentals. They were the first of the summer shufflers, the first to call a pitched tent a seasonal rental. Credit cards, let alone mortgages, were hard for young people to come by.

So VOLF, a land-use conservation group still active today, carved out a handful of so-called youth lots in the 180-acre Pilot's Hill development along Lambert's Cove Road. Only families earning less than $17,000 a year could enter the drawing.

The approach was simple, the arrangement casual.

"They just wanted us to be able to stay. They figured if you had a place to live, you'd stick around," says Carol Lashnits, one of the lucky five whose life was changed that day.

Ms. Lashnits paid $6,000 for her two-acre piece, a parcel then worth $18,000 on the open market. She promised to stay 10 years. If she left before that, VOLF expected the subsidy to be repaid. After 10 years, Ms. Lashnits owned the land free and clear.

Without this early affordable housing initiative, it is unlikely Ms. Lashnits would have been able to stay on-Island and lead an organization like Island Elderly Housing. Ms. Carlet might not have helped hundreds of youngsters at the Edgartown School library. Her husband, David Ferraguzzi, would not have served on the Martha's Vineyard Commission. Ms. Milstein might not have served on the school board, and her husband, Frank Piccione, might never have served on the Tisbury zoning board of appeals.

Nearly 30 years later, Ms. Lashnits still lives at Pilot Hill Farm, as do Ms. Carlet and Mr. Ferraguzzi.

The town of Tisbury assessed both their homes for more than half a million dollars this year; the open market would bear double that.

Of the other original homesteaders, two sold in the 1980s. Ms. Milstein and Mr. Piccione left in 2002, downsizing to another Vineyard property, selling their house for more than $1 million.

That is the story for scores of affordable housing lots created across the Island since the 1970s: Market rates have been or will one day be paid for lots once offered at a bargain. Such properties will be out of reach for struggling Islanders decades from now.

"I feel guilty that it's worth as much as it is. It's almost too much of a gift," said Ms. Lashnits.

Those leading the affordable housing movement today - keenly aware of the dwindling supply of vacant land - want to avoid losing any more ground. Now, they craft long lists of regulations - also called covenants and deed riders - designed to keep these lots affordable forever.

Lifetime covenants - which cap the resale value of the home - are simply the price recipients pay for this leg up, some activists explain.

"These lots are a gift, and the recipients owe the community something. That debt is not being able to make a huge profit. They are able to make a fair profit, but not an unfair one," said Juleann VanBelle, a longtime affordable housing activist.

But some worry that in the process, new recipients are being denied the true benefit of initiatives like Pilot Hill Farm: full, unencumbered membership in the Vineyard community. Some old-school youth lot winners question the attractiveness of these new lots.

"Why would someone want to own something they don't think will be worth much one day?" asked Mr. Piccione. Still, he acknowledges there are good reasons for the restrictive covenants - the real estate market has exploded since he won a youth lot in 1977.

"Times were so different then," he said. "Maybe [protecting affordable lots in perpetuity] is the right thing to do now." The Covenant Quandary

The realities of the Island's dwindling supply of affordable lots are spelled out starkly in a housing inventory compiled this year by Philippe Jordi, executive director of the Dukes County Regional Housing Authority.

Across the Island since the 1970s, 148 affordable ownership opportunities have been created. Deed riders on nearly half of those have already lapsed or will lapse within 25 years. At this point, only nine Island lots are guaranteed to remain affordable forever. Covenants on others, Mr. Jordi said, might be renewable, although towns may not choose to pursue that option.

"In the 1970s and 1980s, the purposes may not have been to create permanent affordable housing," said Mr. Jordi. "People are realizing we can't continue in that vein. We have limited resources, and we need to make sure it lasts with all that we're investing in this."

In every Island town, public and private institutions and volunteer efforts have been chipping away at the affordable housing problem for decades. Private developers set aside youth lots - land offered when they sought approval for subdivision plans - through the decades. Each town applied its own rules in managing these properties, now called resident homesite lots, because recipients are not always young. Rules within towns have also shifted through the years.

"The devil's in the details. People talk about affordable housing, but the mechanics are difficult to figure out. These important details are often lost," said Mr. Jordi.

Under current law, towns can permanently restrict the resale value of lots sold to residents earning less than 80 per cent of median income, currently $52,900 for a family of four. As land values escalated, some towns opened the program to another tier of Islanders - those earning up to 140 per cent of median income. Currently, state law allows restrictive covenants on those lots for up to 30 years, but housing officials have petitioned the legislature to allow permanent caps on these properties as well.

Affordable housing officials realize they control precious commodities. The large subdivisions which guarantee new resident homesite lots dried up a decade ago. As supply dwindles, demand escalates. More and more year-round Islanders fight to remain and only dream of owning a house on the Vineyard, where the least expensive homes now sell for $350,000.

"The youth lot program served its purpose when it was designed in the 1960s," said Molly Flender, chairman of the Chilmark resident homesite committee. "But times have changed." Chilmark is departing from its youth lot program - which put three dozen households on the map over three decades - and will apply permanent covenants on the properties in its planned affordable housing project near the town landfill.

Oak Bluffs, on the other hand, is considering looser regulations; its resident homesite committee may actually roll back restrictions on existing lots.

"There are no easy answers. A family lives there for 30 years, and the kids think [the house] is theirs. Then, something happens to the parents, and the committee tells them they want [the property] back. Is that acceptable? Maybe, but it doesn't sound very good to me," said Anthony Ferriera, a member of the Oak Bluffs resident homesite committee and a homesite recipient in the early 1980s.

Some worry that lifetime deed riders essentially create a new class of homeowners - ones who will never be able to apply their growing home equity toward the financial challenges American families face during their lives.

"A homesite is where you build your equity. If you don't allow someone the rights to that, they'll suddenly realize they are a second-class citizen," said Chris Murphy, a Chilmark resident and longtime proponent of the youth lot program.

Even some recipients worry that with a reduced home value, they'll face difficulty leveraging their equity for other big-ticket expenses.

"I'm totally nervous about sending my son to college. I'm not able to resell this to the point of benefiting me," said Christy Phillipps, a resident of Island Cohousing, an experimental, mixed-income cluster development in West Tisbury.

And policymakers also worry about how their rules will affect resident homesite owners.

"It's difficult. If someone needs to bury his mother or send his kid to college, he may be stuck between a rock and a hard place. But what's the alternative?" said Janet Hathaway, chairman of the Edgartown resident homesite committee.

The alternative, Ms. Hathaway says, is to force the Island's middle-income residents into a lifetime of renting.

"If that's not what we want, we have to put some restrictions on these properties," she added. How Covenants Work

When Lindsay Belisle's name was picked during a 1999 resident homesite lottery in Edgartown, everything seemed to fall into place. Lindsay, her husband, Darren, and their growing family - a new baby made the family five this year - would be able to stay on the Island near their extended family.

The bargain-priced land, for which the Belisles signed a 99-year lease, came with several restrictions. For starters, the house had to be smaller than 2,000 square feet, and the family could not take out a mortgage greater than $179,000 - an amount the resident homesite committee calculated the Belisles could afford based on family income.

The Belisles, trying to anticipate all they'd need and want in a house for decades, ran into trouble.

"We knew we wanted to live in this house for the rest of our lives. We wanted to invest as much as we could," said Mr. Belisle.

During the final stages of construction, the family exceeded its budget. The resident homesite committee urged them to borrow money from unofficial channels. If they had been allowed to increase the mortgage, it would put the house further out of reach for the next family to buy; resale value for this permanently protected lot is based on the mortgage amount. The formula also calls for a modest yearly appreciation, and as median income continues to climb, the Belisles' eventual selling price will be boosted by the increased buying power of the next recipient. But it will not be sold at market value.

"I understand why they want to limit the amount of the mortgage," said Mr. Belisle, who stressed that he is grateful for the land regardless of any financial obstacles the family faced. But he questioned how realistic the resident homesite program's goal is.

"After you stand up two twigs on your land, how can it be called affordable? How can it ever, realistically, go back into affordable housing?" asked Mr. Belisle. Strings Attached

A dozen resident homesite recipients interviewed for this article do not take issue with the covenants attached to their homes.

They understand, they say, that the towns must think ahead and consider those who will be struggling to buy a home generations from now.

"I believe there ought to be affordable housing for the next group of people, because I was able to get mine for such an unbelievable price," said Bob Lee, a housepainter chosen several years ago to buy one of the homes in Island Cohousing.

For those who never envision selling their house, resale limitations are not a big concern.

"I anticipate this being our home for the rest of our lives, so [permanent restrictions] don't really impinge on us," said Richard Skidmore, who is building a home on a permanently protected resident homesite lot in Aquinnah.

But aside from caps on resale value, other restrictions can limit a homeowner's options, some recipients say. Money-making ventures like renting the house to summer visitors are prohibited in most resident homesite lots.

"I should be able to take advantage of the seasonal rental market. It's simply my house, and I ought to be able to do that," said Mr. Lee.

No matter how well town officials try to explain the limitations placed on these resident homesites, desperation blinds many of the applicants.

"We try to stress, 'Do you understand that your children cannot inherit this property?' But they are thinking about the here and now. They are thinking about whether they will be sleeping in someone's basement for the summer, not the buyout formula," said Ms. Hathaway.

Daisy Kimberly, a resident homesite recipient in West Tisbury agreed: "Yeah, there was a level of desperation that makes you overlook those restrictions. Maybe rightfully so. If you're not desperate, you are looking for something else."

The year before Ms. Kimberly was selected for her lot, her longtime landlord decided to put the house they had rented for 17 years on the market. At that point, the Kimberlys already planned on spending their lives on the Vineyard.

"If you've made a commitment to live here, and you don't have a trust fund or money squirreled away, you have to wiggle in somewhere. We were happy to wiggle in here," Ms. Kimberly said. "There's no way, though, you can't feel a little ambivalent. Everyone likes freedom. No one wants to seem ungrateful, because we're not. But everyone likes to be trusted to not take advantage of their property."

Despite any concerns about how these resident homesite recipients will handle life's financial hurdles, their gratitude is renewed every time they watch friends still struggling to hang on to a Vineyard life.

"The benefits definitely outweigh my misgivings. I actually own something on the Vineyard, and I am reminded of that by people around me who are having to move again," said Ms. Phillipps.